Multibagger Ethos share price gains 5%: Remains pick of the week for Axis: 6 key reasons

Stocks to Buy: Multibagger Ethos Ltd share price gained 5% during Intraday trades on Tuesday. The Ethos share price that opened at ₹3292.95 on Tuesday on the BSE , slightly higher than previous close of ₹3228.55. Ethos share price however rose to intraday highs of ₹3395.45 marking 5% gains.

Ethos share price having gained 105% in last one year has given Multibagger returns to the investors.

Ethos share price also remains the pick of the week for Axis Securities. Axis Securities target price of ₹3600 for Ethos share price indicates more than 7% upside over current market price of around ₹3350.

Here are six key reason why Axis expects an upside for the stock

1. Sturdy performance: Ethos's Q1FY25 revenue growth of almost 19% YoY and 12.3% SSSG were fueled by strong demand in the higher-end luxury category (growth of 9.5% YoY above ₹2.5 Lc), which caused its Average Selling price to rise by 25% YoY to ₹2.2 Lakh.

2. Trend of structural growth in the luxury market: India is about to witness a surge in demand for luxury goods. India's luxury market is predicted to grow five times over the next ten years as the country's affluent population continues to rise in number and attain higher aspirations and disposable incomes.

3.Entering the Certified Pre-Owned (CPO) market: The company is entering this market because there aren't many new luxury watches available. This, in Axis Securities opinion, is a positive decision. With less capital outlay and a 50–60 day working capital cycle as opposed to 140–150 days for new watches, the CPO model is asset-light. Consequently, it generates a greater ROCE of 20%+ as opposed to 15–18% for new.

4.Given that high-margin exclusive brands command 2 times gross margins (~35–40%) compared to non-exclusive products, an increasing share of these brands in the portfolio is projected to drive the overall margins profile. Presently, watches from exclusive brands account for about 30% of sales; however, this percentage is expected to increase in the years to come.

5. Diversifying into rapidly expanding premium markets like jewelry (Messika and Bvlgari) and luggage (Rimowa). Even though the business is just getting started in this market, it is setting itself up for future expansion and may be its next growth driver.

6. Strong Outlook: Axis Securities expects the business to report robust Revenue CAGR growth of 33% and net profit growth of 40% over FY24-27 estimated, given the above-mentioned strong investment thesis. The stock is currently trading at 48 times and 33times its FY26 and FY27 estimated Earnings per share.

Within the smallcap market, the company looks appealing due to its superior return profile and increased visibility of earnings growth.

Axis Securities thereby has recommend a BUY rating on the stock with a near-term target price of ₹3,600 per share, implying an upside of more than 7% from the current market price.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions